If your key people are limited to a qualified retirement plan and year-end bonuses for accumulating retirement income, they're probably looking for alternatives. Ones your key competitors may be happy to provide. What can a small business owner do? Consider offering non-qualified benefits to your top employees. To understand what non-qualified retirement plans can do, first consider what qualified plans can't do.

Qualified plans effectively discriminate against highly paid employees. Why? Thanks to the tax code, not only do top earners pay higher taxes, but they are limited in how much they can set aside for their future. That's a serious problem, considering estimates suggest they may need up to 85% of their salary just to maintain their lifestyle after retirement. By themselves, qualified plans can't ensure that level of financial independence.

Non-qualified plans, on the other hand, let you supplement highly compensated executives' retirement benefits - handsomely. And while such plans aren't eligible for the same tax advantages as qualified plans, most of the time they're well worth the consideration, because they let you call the shots - rewarding only the employees you choose, and funding your plan exactly as you see fit. And, depending on how these plans are "financed," the net cost to your company may be zero.

A non-qualified plan offers employers other advantages. Obviously, it helps you attract the best and the brightest. Even better, it provides them with a powerful incentive to stay simply by making it very expensive to leave - true golden handcuffs. For instance, you can specify that all or most benefits will be forfeited if the employee leaves your company before normal retirement age.